civil rico complaint

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO

NOEMI TORRES RONDA; ANGELO RIVERA * LAMBOY * * Plaintiffs, * *

v., * * CIVIL NO.:

JOINT UNDERWRITING ASSOCIATION; * CARIBBEAN ALLIANCE INSURANCE COMPANY; * CHARTIS INSURANCE COMPANY OF PUERTO * RICO; COOPERATIVA DE SEGUROS MULTIPLES * RE: CIVIL RICO DE PUERTO RICO; INTEGRAND ASSURANCE* CLASS ACTION COMPANY; MAPFRE-PRAICO; NATIONAL * INSURANCE COMPANY; OPTIMA INSURANCE * PLAINTIFFS COMPANY; REAL LEGACY ASSURANCE COMPANY, * DEMAND INC.; ROYAL & SUN ALLIANCE OF PUERTO * TRIAL BY RICO, INC.; SEGUROS TRIPLE-S PROPIEDAD * JURY INC.; UNIVERSAL INSURANCE COMPANY; * ALLSTATE INSURANCE COMPANY; GENERAL * ACCIDENT INSURANCE COMPANY; NATIONWIDE * MUTUAL INSURANCE COMPANY; INSURANCE * COMMISSIONER OF THE COMMONWEALTH OF * PUERTO RICO, RAMÓN L. CRUZ-COLÓN, in * his official capacity; SECRETARY OF THE * DEPARTMENT OF TRANSPORTATION AND PUBLIC * WORKS, RUBEN A. HERNANDEZ GREGORAT, in * his official capacity; and, SECRETARY * OF THE DEPARTMENT OF THE TREASURY of * the COMMONWEALTH OF PUERTO RICO, JESUS * F. MENDEZ, in his official capacity, * * Defendants. * *****************************************

PLAINTIFFS’ CLASS ACTION COMPLAINT

Case 3:11-cv-01826 Document 1 Filed 08/19/11 of 82

ii

INDEX

Page(s)

I. NATURE OF THE ACTION 1-4 II. JURISDICTION AND VENUE 4-5 III. PARTIES 5-17 A. PLAINTIFFS AND CLASS DEFINITION 5-7 B. THE DEFENDANTS 7-17 IV. ASSOCIATED IN FACT INDIVIDUALS 17-19 V. OTHER PARTICIPANT INDIVIDUALS 19 VI. THE COMPULSORY LIABILITY INSURANCE SYSTEM 19-27 VII. DEFENDANTS’ SCHEME TO DEFRAUD 28-30 VIII. THE ENTERPRISE 30-32 IX. COMMON FACTUAL ALLEGATIONS 32-49 X. THE PREDICATE ACTS 50-51 XI. THE PATTERN OF RACKETEERING ACTIVITY 51-52 XII. CLASS ALLEGATIONS 53-59 XIII. LAW VIOLATIONS IN FURTHERANCE OF THE SCHEME TO DEFRAUD 59-76 COUNT I – VIOLATIONS TO SECTION 59-65 1962(c) OF RICO A. THE ENTERPRISE 59-61 B. RACKETEERING PREDICATE ACTS 61-63 C. THE INJURY BY REASON OF THE VIOLATION OF SECTION 1962(c) 63-65 COUNT II – VIOLATIONS TO SECTION 1962(a) OF RICO 65-70

A. THE ENTERPRISE 65

B. THE RACKETEERING INCOME 65-68 Page(s)


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C. THE INJURY BY REASON OF THE VIOLATION OF SECTION 1962(a) 68-70 COUNT III – VIOLATIONS TO SECTION 1962(d) OF RICO 70-72 A. THE ENTERPRISE 70 B. THE CONSPIRACY 70-71 C. THE INJURY BY REASON OF THE VIOLATION OF SECTION 1962(d) 71-72 COUNT IV – THE INSURANCE CODE VIOLATIONS 73-75

COUNT V – DECEIT (“DOLO”) IN THE FULFILLMENT OF CONTRACTUAL OBLIGATIONS 75-76 XIV. PERMANENT INJUNCTION AND DECLARATORY JUDGMENT 76-78 XV. PRAYER FOR RELIEF 78


TO THE HONORABLE COURT:

Plaintiffs, by through the undersigned counsels, very

respectfully state, allege, and request:

I. NATURE OF THE ACTION

1.1 The present litigation is a class action of motor

vehicle owners, pursuant to Title IX of the Organized Crime

Control Act of 1970, otherwise known as Racketeer Influenced and

Corrupt Organizations Act (henceforth "RICO"), as well as the

provisions of Rule 23 of Federal Civil Procedure, in which the

Representative Plaintiffs, on behalf of the Class, request that

the Defendants return to the owners of motor vehicles those

portions of the annual dollar-premium collected from them when

they acquired the policies of the compulsory liability insurance

established by law, and which were withheld and misappropriated

by the Defendants, in violation to the Puerto Rico Insurance

Code.

1.2 The Representative Plaintiffs were insured under the

Compulsory Motor Vehicle Liability Insurance Act, Law 253 of

December 27, 1995, codified at 26 P.R. Laws Ann. §§ 8051 et seq.

(henceforth "Law 253"), which came into effect on January 1,

1998. They had to pay either a premium of $99.00 for a private

unit or a premium of $148 for a commercial unit, which are

uniform, the same as approximately the other 2,400,000 owners of

private and commercial motor vehicles in Puerto Rico.


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1.3 The Defendants, the entity created by Law 253 and the

individual insurance companies that comprise it, taking

advantage of their interlocking directorships, conspired and

agreed with each other to engage, and did in fact engage, in

millions of predicate acts of mail fraud, in violation of RICO,

18 U.S.C. §§ 1341, 1962, as part of a scheme to defraud and

obtain money from Puerto Rican motor vehicle owners.

1.4 The Defendants devised a scheme or artifice to defraud

whereby they charged all Puerto Rican motor vehicle owners an 8%

of the dollar premium by concept of an “acquisition cost” for

services of brokers that they knew were not going to be used by

the insured, plus an amount estimated in 4% of the do1lar

premium by concept of an “administrative cost" for the issuance

of paper copies of policies, which they never intended to issue

to the insured. The Defendants, thereafter, failed to reimburse

to the motor vehicle owners the price they had unknowingly paid

for such non-incurred charges, hidden in the annual insurance

premium rate, amounting to 12% of its cost. Instead, the

Defendants embezzled such funds for their own pecuniary benefit.

1.5 The collection of the acquisition and administrative

costs, without the corresponding refund or return of the portion

of the premium not incurred as costs constitutes illegal dealing

in premiums prohibited by the dispositions of the Puerto Rico

Insurance Code.


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1.6 The illegal retention and embezzlement by the

Defendants of the portion of the premium or charge for insurance

in excess of the amount spent resulted in million of dollars of

illegal gains for them.

1.7 From the year 1998 to the present, in furtherance of

the scheme to defraud Puerto Rican motor vehicle owners, the

Defendants caused, and continue to cause, the United States

mails to be used to send millions of licenses or registrations

to the over 2,400,000 motor vehicle owners, which contained the

charges for the payment of the compulsory insurance policy. Each

of these mailings is an act that is indictable as mail fraud and

together they constitute a pattern of racketeering activity. By

conspiring to conduct, and in fact conducting, the affairs of

their ENTERPRISE, as defined hereunder, through this pattern of

racketeering activity, the Defendants violated RICO, 18 U.S.C. §

1962(c) & (d). As result, the Representative Plaintiffs and the

Class Members were injured in their property.

1.8 Furthermore, the insurer created by Law 253

transmitted, by means of interstate wire, racketeering proceeds

gained from the scheme to defraud to a financial institution in

Chicago, Illinois. Each of these wire transfers is a predicate

act that is indictable as wire fraud, under 18 U.S.C. § 1343,

and together they constitute a separate and distinct pattern of

racketeering activity. This insurer then used or invested income


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received from both patterns of racketeering activity

respectively comprised of predicate acts of mail or wire fraud,

in its business operations, in order to further engage in

illegal dealing in premiums, in violation of RICO, 18 U.S.C. §

1962(a). As result, the Representative Plaintiffs and the Class

Members continued to be injured in their property.

1.9 Moreover, the Representative Plaintiffs are requesting

declaratory and injunctive relief. A declaratory judgment and

permanent injunction will guarantee that the Defendants and all

parties cease and permanently desist from engaging in illegal

dealings in premiums as to the Representative Plaintiffs and the

Class Members regarding the costs for brokerage services and

paper copies of policies, in violation of the applicable laws,

statutes and regulations. Such relief will also ensure that the

Puerto Rico Insurance Commissioner, the Secretary of the Puerto

Rico Department of Transportation and Public Works and the

Secretary of the Treasury Department do not acquiesce to the

Defendants’ conduct.

1.10 Pursuant to the Seventh Amendment of the United States

Constitution, the Representative Plaintiffs demand a trial by

jury in the instant case. Fed. R. Civ. P. 38b.

II. JURISDICTION AND VENUE

2.1 This Honorable Court has jurisdiction over this civil

action pursuant to 28 U.S.C. § 1331, this being a civil action


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which arises under 18 U.S.C. §§ 1961-1968, 901(a) of RICO, and

in particular, under 18 U.S.C. § 1964.

2.2 Venue is proper in the instant case as all claims

arise from events that have occurred and are occurring within

the jurisdiction of this Court in the Commonwealth of Puerto

Rico.

2.3 The Representative Plaintiffs further invoke the

supplemental jurisdiction of this Court to hear and adjudicate

claims arising under the laws of the Commonwealth of Puerto

Rico, specifically, under Article 27.160 of the Puerto Rico

Insurance Code, 26 P.R. Laws Ann. § 2716, Articles 1054 and 1060

of the Puerto Rico Civil Code, 31 P.R. Laws Ann. §§ 3018, 3024,

and Act No. 118 of June 25, 1971, 32 P.R. Laws Ann. § 3341,

since they are so related to the afore stated federal claims

that they all form part of the same case or controversy under

Article III of the Constitution of the United States.

2.4 Pursuant to Rule 65(b) of the Federal Rules of Civil

Procedure, this Court has jurisdiction to issue a Permanent

Injunction.

III. PARTIES

A. PLAINTIFFS AND CLASS DEFINITION:

3.1 The individual Plaintiffs and Class Members represent

two Classes of Plaintiffs.


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3.2 The First Class of Plaintiffs is defined as all

private motor vehicle owners in the Commonwealth of Puerto Rico,

who in compliance with the Compulsory Motor Vehicle Liability

Insurance Act, acquired compulsory insurance during the years

1998 to the present, paying the uniform annual premium of $99.00

(henceforth referred to as the “Private-Vehicle Class”).

3.3 The Plaintiff Representative, who appears on her own

behalf, and on behalf and for the benefit of all other members of

the Private-Vehicle Class, is NOEMI TORRES RONDA, married,

resident of Cabo Rojo, Puerto Rico, and owner of the motor

vehicle model Mirage, make Mitsubishi, year 1998, and license

plate CZM631.

3.4 The Second Class of Plaintiffs is defined as all

commercial motor vehicle owners in the Commonwealth of Puerto

Rico, who in compliance with the Compulsory Motor Vehicle

Liability Insurance Act, acquired compulsory insurance during

the years 1998 to the present, paying the uniform annual premium

of $148.00 (henceforth referred to as the “Commercial-Vehicle

Class”).

3.5 The Plaintiff Representative, who appear on his own

behalf, and on behalf and for the benefit of all other members of

the Commercial-Vehicle Class, is ANGELO RIVERA LAMBOY, married,

resident of Aibonito, Puerto Rico, and owner of the motor


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vehicle model F150, make Ford, year 1997, and license plate

795770.

3.6 Excluded from the Private-Vehicle and Commercial-

Vehicle Classes are: Defendants; Defendants’ employees, co-

conspirators, officers, directors, legal representatives, heirs,

successors and wholly or partly owned subsidiaries or affiliated

companies; class counsel and their employees; the Judge and

judicial officers and their immediate family members and

associated court staff assigned to this case; and, all persons

within the third degree of relationship to any such persons.

3.7 The Plaintiffs have learned of the facts object of the

present action within the four years prior to the filing of the

present complaint. Moreover, as a result of the Defendants’

fraudulent concealment, the applicable statutes of limitations

have been tolled or have not yet begun to run.

B. THE DEFENDANTS:

3.8 The Defendants are: the JOINT UNDERWRITING ASSOCIATION

or, in Spanish, “Asociación de Suscripción Conjunta De Seguro De

Responsabilidad Obligatorio” ("JUA"); CARIBBEAN ALLIANCE

INSURANCE COMPANY (“CAICO”); CHARTIS INSURANCE CO., OF PUERTO

RICO (“CHARTIS”), formerly known as AMERICAN INTERNATIONAL

INSURANCE COMPANY OF PUERTO RICO (“AIG”); COOPERATIVA DE SEGUROS

MULTIPLES DE PUERTO RICO (“COOPERATIVA”); INTEGRAND ASSURANCE

COMPANY (“INTEGRAND”); MAPFRE-PRAICO, formerly known as PUERTO


8

RICO AMERICAN INSURANCE COMPANY (“PRAICO”); NATIONAL INSURANCE

COMPANY (“NATIONAL”); OPTIMA INSURANCE COMPANY (“OPTIMA”); REAL

LEGACY ASSURANCE COMPANY, INCORPORATED (“REAL LEGACY”); ROYAL &

SUN ALLIANCE OF PUERTO RICO, INCORPORATED (“ROYAL & SUN”);

SEGUROS TRIPLE-S PROPIEDAD, INCORPORATED (“TRIPLE-S”); UNIVERSAL

INSURANCE COMPANY (“UNIVERSAL”); MAPFRE PREFERRED RISK INSURANCE

COMPANY, formerly know as PREFERRED RISK INSURANCE COMPANY

(“PREFERRED RISK”); ALLSTATE INSURANCE COMPANY (“ALLSTATE”);

GENERAL ACCIDENT INSURANCE COMPANY (“GENERAL ACCIDENT”);

NATIONWIDE MUTUAL INSURANCE COMPANY (“NATIONWIDE”); the

Insurance Commissioner of the Commonwealth of Puerto Rico, RAMON

L. CRUZ-COLON (“CRUZ-COLON”); the Secretary of the Department of

Transportation and Public Works, RUBEN A. HERNANDEZ-GREGORAT

(“HERNANDEZ-GREGORAT”); and, the Secretary of the Department of

the Treasury of the Commonwealth of Puerto Rico, JESUS F. MENDEZ

(“MENDEZ”).

3.9 The JUA was created by Law 253 as a private legal

entity, for profit, and with “general corporate powers,” such as

the faculties to sue and be sued. See, 26 P.R. Laws Ann. §§

8055(A), §2905.

3.10 The JUA is composed of all “private insurers” whose

volume of premiums underwritten for motor vehicle liability

insurance is greater than one percent (1%) of the total volume

of motor vehicle liability insurance premiums underwritten in


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Puerto Rico. 26 P.R. Laws Ann., § 8052(b). Presently, these

insurance companies are CAICO, CHARTIS, COOPERATIVA, INTEGRAND,

MAPFRE–PRAICO, NATIONAL, OPTIMA, REAL LEGACY, TRIPLE-S and

UNIVERSAL. In the past, at some point or another in time, AIG

(now known as CHARTIS), PRAICO (now known as MAPFRE–PRAICO),

ROYAL & SUN, PREFERRED RISK, ALLSTATE, GENERAL ACCIDENT and

NATIONWIDE also formed part of the JUA.

3.11 At all times relevant herein, CAICO, CHARTIS,

COOPERATIVA, INTEGRAND, MAPFRE–PRAICO, NATIONAL, OPTIMA, REAL

LEGACY, TRIPLE-S, UNIVERSAL, AIG, PRAICO, ROYAL & SUN, PREFERRED

RISK, ALLSTATE, GENERAL ACCIDENT and NATIONWIDE (henceforth

collectively referred to as “traditional insurers”) were

incorporated or organized under the laws of, and with their

principal places of business in, the Commonwealth of Puerto

Rico, where they were authorized to conduct, as they conducted,

the business of insurance.

3.12 Since its creation, the JUA’s Board of Directors, by

law, was to be comprised of five Directors. The members of the

JUA elected four Directors, while the fifth Director was the

officer in charge of the JUA. In the year 2002, the number of

members of the JUA’s Board of Directors was increased by law to

seven, of which three were to be appointed by the Governor of

the Commonwealth of Puerto Rico and the remaining four are

members of the JUA. However, the Governor, as mandated by law,


10

never appointed the three additional directors of the JUA. The

2009 amendment to Law 253 provided that the three governmental

appointees cannot be public officers and must be knowledgeable

of the insurance market. 26 P.R. Laws Ann. § 8055(f).

3.13 The Board of Directors of the JUA, since its creation

in December 27, 1995, and up to the present, has served as a

conduit for the ENTERPRISE’S fraudulent objectives, by which the

interlocking directors of the JUA and the traditional insurer

members of such ENTERPRISE, jointly with other individuals,

knowingly, intentionally and unlawfully, have met, planned,

devised, organized, and assisted in the adoption and

implementation of part, or all, of the fraudulent artifices that

form part of the Scheme to Defraud defined herein after.

3.14 In the years 1996 and 1997, the Board of Directors of

the JUA was comprised of the following individuals: Juan Antonio

Terrassa (“Terrassa”), President, and also, President of the

Board of Directors of PRAICO; Luis Miranda-Casañas (“Miranda-

Casañas”), Vice-President, and also, President of the Board of

Directors of UNIVERSAL; Edwin Quiñones (“Quiñones”), Director,

and also, President of the Board of Directors of COOPERATIVA;

Dennis Hanftwurzel (“Hanftwurzel”), Director, and also,

President of the Board of Directors of GENERAL ACCIDENT; Hilda

Rodriguez-Forteza, Esq. (“Rodriguez-Forteza”); and, Alberto

Rodriguez, Esq.(“Rodriguez).


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3.15 In the year 1998, the Board of Directors of the JUA

was comprised of the following individuals: Terrassa, President,

and also, President of the Board of Directors of PRAICO;

Miranda-Casañas, Vice-President, and also, President of the

Board of Directors of UNIVERSAL; Adrian Ortiz (“Ortiz”),

Executive Director; Quiñones, Director, and also, President of

the Board of Directors of COOPERATIVA; Rodriguez-Forteza; and,

Rodriguez.





Board of Directors of UNIVERSAL; Ortiz, Executive Director;

Quiñones, Director, and also, President of the Board of

Directors of COOPERATIVA; Patricia Gonya (“Gonya”), Director,

and also, Director of the Board of NATIONWIDE; Rodriguez-

Forteza; and, Rodriguez.





Board of Directors of UNIVERSAL; Ortiz, Executive Director;

Quiñones, Director, and also, President of the Board of


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Directors of COOPERATIVA; Gonya, Director, and also, Director of

the Board of NATIONWIDE; Rodriguez-Forteza; and, Rodriguez.





Board of Directors of UNIVERSAL; Rene Campos (“Campos”),

Director, and also, President of the Board of Directors of

COOPERATIVA; Victor Salgado-Micheo (“Salgado-Micheo”), Director,

and also, Director of the Board of INTEGRAND.


was comprised of the following individuals: Campos, President,



Board of Directors of UNIVERSAL; Salgado-Micheo, Director, and

also, Director of the Board of INTEGRAND; and, Antonio Huertas

(“Huertas”), Director, and also President of the Board of

Directors of PRAICO.




Salgado-Micheo, Vice-President, and also, President of the Board

of Directors of INTEGRAND; Miranda-Casañas, Director, and also,

President of the Board of Directors of UNIVERSAL; and, Huertas,


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Director, and also President of the Board of Directors of

PRAICO.





Board of Directors of UNIVERSAL; Salgado-Micheo, Director, and

also, President of the Board of Directors of INTEGRAND; and,

Raul Costilla (“Costilla”), Director, and also, President of the

Board of Directors of PRAICO.


was comprised of the following individuals: Miranda-Casañas,

President, and also, President of the Board of Directors of

UNIVERSAL; Salgado-Micheo, Vice-President, and also, President

of the Board of Directors of INTEGRAND; Campos, Director, and

also, President of the Board of Directors of COOPERATIVA; and,

Costilla, Director, and also, President of the Board of



was comprised of the following individuals: Victor Rios

(“Rios”), President, and also, President of the Board of

Directors of REAL LEGACY; Eva Salgado (“Salgado”), Vice-


TRIPLE-S; Costilla, Director, and also, President of the Board


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of Directors of PRAICO; and, Francisco Diaz, Director, and also,

President of the Board of Directors of AIG, now CHARTIS.


was comprised of the following individuals: Miranda-Casañas,


UNIVERSAL; Salgado-Micheo, Vice-President, and also, President

of the Board of Directors of INTEGRAND; Campos, Director, and

also, President of the Board of Directors of COOPERATIVA; and,

Costilla, Director, and also, President of the Board of



was comprised of the following individuals: Rios, President, and

also, President of the Board of Directors of REAL LEGACY; Luis

Berrios (“Berrios”), Vice-President, and also, President of the

Board of Directors of UNIVERSAL; Salgado, Director, and also,

President of the Board of Directors of TRIPLE-S; and, Costilla,


MAPFRE-PRAICO.



also, President of the Board of Directors of REAL LEGACY;

Berrios, Vice-President, and also, President of the Board of

Directors of UNIVERSAL; Salgado, Director, and also, President


15

of the Board of Directors of TRIPLE-S; and, Costilla, Director,

and also, President of the Board of Directors of PRAICO.



also, President of the Board of Directors of REAL LEGACY;

Monique Miranda, Vice-President, and also, President of the

Board of Directors of UNIVERSAL; Salgado, Director, and also,

President of the Board of Directors of TRIPLE-S; Costilla,


MAPFRE–PRAICO; Eduardo R Emanuelli; Terrassa; and, Angel M

Cintrón.

3.28 The Defendants, either on their own or through their

agents, are currently found in, and/or transact business within,

the Commonwealth of Puerto Rico, and/or at the time of the

commission of the acts alleged hereunder were found in, and/or

transacted business within the Commonwealth of Puerto Rico, and

the cause of action which is the object of this complaint arises

out of those business transactions in the Commonwealth of Puerto

Rico.

3.29 At all times relevant herein, the Defendants, on their

own or through their agents or employees, have knowingly,

intentionally and unlawfully, aided and abetted and conspired

with the other members of the ENTERPRISE defined hereunder to

commit within the Commonwealth of Puerto Rico the wrongful acts


16

alleged in this complaint and/or committed or participated in the

commission of those acts within or outside the Commonwealth of

Puerto Rico, purposefully directing their wrongful acts toward

the forum of Puerto Rico, causing in Puerto Rico, directly or

indirectly, the violations of RICO and the injuries sustained by

the Representative Plaintiffs and Class Members.

3.30 Each of the Defendants, individually, and through its

association-in-fact with the other Defendants (the ENTERPRISE),

is or has been engaged in, or its activities affect or have

affected, interstate commerce.

3.31 Defendants' racketeering activities were conducted

through a pattern of acts and transactions, which occurred and/or

had their effect within the Commonwealth of Puerto Rico.

3.32 CRUZ-COLON, as Insurance Commissioner, sets the terms

of the compulsory liability insurance policy, the premium rate,

and the amount of coverage. By statute, the Insurance

Commissioner is directed to establish the manner of distribution

of the total amount of premiums received by the JUA, the

structure and operation of the JUA, and its direction by its

Board of Directors, so that the JUA may accomplish its goals in

a "cost-effective, fair and nondiscriminatory" manner; and, he

has considerable supervision over the operating plan and the

method of premium distribution. 26 P.R. Laws Ann., §§ 8055,


17

8056. CRUZ-COLON is sued in his official capacity only for

purposes of the implementation of injunctive relief.

3.33 HERNANDEZ-GREGORAT oversees and administers the

operations of the Department of Transportation and Public Works

(“DTPW”), which issues and mails, via the U.S. Postal Service,

the motor vehicle registration, which includes the annual

premium for the compulsory liability insurance policy, to each

motor vehicle owner. By statute, the Secretary of the DTPW is

directed to provide to the JUA all relevant information

regarding the insured motor vehicle owners and the payment of

the license stickers. 26 P.R. Laws Ann., § 8055. HERNANDEZ-

GREGORAT is sued in his official capacity only for purposes of

the implementation of injunctive relief.

3.34 MENDEZ oversees and administers the operations of the

Department of the Treasury (“Treasury”), which collects the

premium for the compulsory liability insurance paid by each

motor vehicle owner at the time he/she acquires or renews the

motor vehicle's license. 26 P.R. Laws Ann., §§ 8051, 8053(a).

The Secretary of the Treasury then turns over the total amount

of the premiums so received to the JUA. Id., § 8055(c). MENDEZ

is sued in his official capacity only for purposes of the

implementation of injunctive relief.


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IV. ASSOCIATED IN FACT INDIVIDUALS

4.1 Juan A. Garcia (“Garcia”) is the former Insurance

Commissioner of the Commonwealth of Puerto Rico, for the period

covering 1993 to 2001. As such, he knowingly, intentionally and

unlawfully, aided and abetted and conspired with the members of

the ENTERPRISE in approving premium rates, rules and regulations

that were used in carrying out the Scheme to Defraud described

hereunder.

4.2 CRUZ-COLON was the Assistant to the Insurance

Commissioner Garcia, for the period covering 1993 to 2001. As

such, he knowingly, intentionally and unlawfully, aided and

abetted and conspired with the members of the ENTERPRISE in

furtherance of the Scheme to Defraud described hereunder.

4.3 Ortiz held the position of President of the JUA, in

the years 1997 to 2000, and was member of its Board of

Directors, in the years 1998, 1999 and 2000. He knowingly,

intentionally and unlawfully, planned, devised and concocted the

fraudulent artifices that form part of the Scheme to Defraud

defined hereunder, and aided and abetted and conspired with the

members of the ENTERPRISE in furtherance thereof.

4.4 Miranda-Casañas was a member of the Board of Directors

of the JUA, in the years 1996, 1997, 1998, 1999, 2000, 2001,

2002, 2003, 2004, 2005 and 2007. He knowingly, intentionally and

unlawfully, planned, devised and concocted the fraudulent


19

artifices that form part of the Scheme to Defraud defined

hereunder, and aided and abetted and conspired with the members

of the ENTERPRISE in furtherance thereof.

4.5 Terrassa was a member of the Board of Directors of the

JUA, in the years 1996, 1997, 1998, 1999, 2000, 2001 and 2010.

He knowingly, intentionally and unlawfully, planned, devised and

concocted the fraudulent artifices that form part of the Scheme

to Defraud defined hereunder, and aided and abetted and

conspired with the members of the ENTERPRISE in furtherance

thereof.

V. OTHER PARTICIPANT INDIVIDUALS

5. The Insurance Commissioners of the Commonwealth of

Puerto Rico, for the period covering from 2001, and up to the

present time, were either willfully blind, and/or knowingly,

intentionally and unlawfully, aided and abetted and conspired

with the other members of the ENTERPRISE in allowing the

perpetuation of the Scheme to Defraud defined hereunder.

VI. THE COMPULSORY LIABILITY INSURANCE SYSTEM

6.1 Before the enactment of Law 253, uninsured drivers

caused over $110 million in damages to other vehicles each year

in Puerto Rico, and it was estimated that only 25 percent to 30

percent of the vehicles in Puerto Rico were covered under some

type of liability insurance.


20

6.2 In view of the problem of financial loss as a result

of uncompensated damages to motor vehicles in traffic accidents,

Law 253 created a compulsory automobile liability insurance

system, which covers the damages caused to other motor vehicles

in such accidents. To such ends, Law 253 requires every motor

vehicle owner in Puerto Rico to obtain and keep a liability

insurance coverage in effect to respond for damages caused by

said individual to motor vehicles of third parties in a traffic

accident. 26 P.R. Laws Ann., § 8051.

6.3 Beginning in the year 1998, this compulsory insurance

system provided each insured motor vehicle owner with $3,000 of

coverage for damages caused to another motor vehicle per

accident in exchange for a uniform premium, set at $99 for each

private passenger vehicle and $148 for each commercial vehicle.

26 P.R. Laws Ann., §§ 8052(j) and 8056(a)). In the year 2009,

the coverage of the compulsory insurance was increased to a

$4,000 limit per accident. 26 P.R. Laws Ann., § 8052(k).

6.4 Law 253 allows the motor vehicle owners to obtain the

compulsory coverage through the traditional insurers or through

the JUA. The traditional insurers are required by law to offer

the compulsory liability insurance in two ways: both as

traditional insurers to a defined class of drivers and as

members of the JUA, to which they belong. 26 P.R. Laws Ann. §§

8053(d), 8054(a), 8055(a). Law 253 allows the traditional


21

insurers to reject certain applicants for the compulsory

insurance, pursuant to regulations promulgated by the Insurance

Commissioner. Id., § 8054(b). The criteria for rejection are

defined by the Insurance Commissioner's Puerto Rican Insurance

Rule LXX ("Rule LXX"), promulgated in Regulation No. 6254, in

December of 2000. Most of the criteria in Rule LXX for

permissible rejections identify applicants who are bad drivers

or otherwise of high risk. Rule LXX, Art. 8.

6.5 Law 253 created the JUA as a residual market insurer

to provide insurance coverage to the high-risk drivers rejected

by the traditional insurers, 26 P.R. Laws Ann. § 8055(b), which

were originally calculated to be around 3% of the applicants.

6.6 Law 253 allows motor vehicle owners to opt out of the

compulsory liability insurance scheme by purchasing traditional

liability insurance with comparable or better coverage. Id., §

8061; Rule LXX, Art. 12(a).

6.7 Law 253 requires the traditional insurers to offer the

policy despite the availability of coverage from the JUA, 26

P.R. Laws Ann. §§ 8054(a), 8055(b), and allows them to apply for

approval and to sell the compulsory insurance at less than the

rate set by the Commonwealth, id. § 8056(c). The legislative

history suggests that Law 253 was meant to encourage competition

"between insurance companies wanting to have a greater number of

insured, which will have to extend offers in order to attract


22

them." Daily Sessions Record, Senate of Puerto Rico, Monday,

October 9, 1995. As a result, the statutory scheme contemplated

competition in compulsory insurance for non-high-risk drivers

between traditional insurers themselves and between them and the

JUA. See, Arroyo-Melecio v. Puerto Rican Am. Ins. Co., 398 F.3d

56, 60 (1st Cir. 2005).

6.8 The DTPW is in charge of the billing for the

compulsory liability insurance. To that effect, the DTPW places

in the post offices or authorized depositories for mail matter,

the registrations for all motor vehicles in Puerto Rico,

containing the annual premium for the compulsory insurance

policy, which are then delivered, by the U.S. Postal Service, to

the motor vehicles owners.

6.9 Each vehicle owner must pay the premium for the

compulsory liability insurance to the Secretary of the Treasury

at the time he acquires or renews the vehicle's license. 26 P.R.

Laws Ann., §§ 8051, 8053(a). The Secretary then turns over the

total amount of the premiums so received to the JUA, which is

then responsible for distributing the premiums among its members

and itself, as the case may be. Id., § 8055(c); Rule LXX, Art.

19.

6.10 The motor vehicle registration stamped as paid

constitutes evidence of compliance with the compulsory liability

insurance system.


23

6.11 Every motor vehicle for which the requisite compulsory

liability insurance premium has been paid is considered to be

insured by the JUA, unless the owner of the same has selected a

traditional insurer or purchased a traditional insurance policy.

See, Rule LXX, Art. 12(a).

6.12 When the owner of the motor vehicle had traditional

liability insurance in effect at the time of the issuance or

renewal of the license, the JUA was supposed to issue a check

payable to the Secretary of the Treasury to be used by such

insured to pay for the compulsory liability insurance premium;

but, in reality, the practice was that the insured paid such

premium to the Secretary of the Treasury at the moment of

issuance or renewal of the license and could thereafter seek a

credit of that premium to his traditional insurance premium from

his insurer. Rule LXX, Art 10(a); 26 P.R. Laws Ann., § 8061(b).

6.13 The 2009 amendment to Law 253 requires the traditional

insurer to issue to its insured a certification authorized by

the JUA as evidence of compliance with the compulsory liability

insurance, which the motor vehicle owner may present to the

Secretary of the Treasury to avoid making duplicate compulsory

premium insurance payments. 26 P.R. Laws Ann., § 8061(b). When

the motor vehicle owner pays the compulsory insurance premium

directly to the Secretary of the Treasury, which is usually the

case, the traditional insurer then credits in the premiums


24

charged to the insured for the traditional liability insurance

the amount of the payment received from the Secretary of the

Treasury in compliance with the provisions of Law 253. Id.

6.14 All members of the JUA share in its profits and

losses. 26 P.R. Laws Ann. § 8055(e). To compensate for the fact

that the JUA would supposedly insure drivers considered to be

high risk by traditional insurers, all the JUA's profits,

including those distributed to the traditional insurers, were

originally exempt from income taxes, until the law was amended

on September 24, 2002. But the 2009 amendment reestablished the

tax exemption when the profits are deposited in governmental

banks (“Banco Gubernamental de Fomento” or “Banco de Desarrollo

Economico”). Id., § 8055. Through the JUA, the risk of insuring

these high-risk drivers was supposed to be spread among all the

traditional insurers. The profits distributed to the JUA members

(the traditional insurers) also encompass the profits from the

sale of non-high-risk policies insured by the JUA. See, Arroyo-

Melecio, 398 F.3d, at 62.

6.15 For both the traditional insurers and the JUA, the

Commonwealth, through the Insurance Commissioner, sets the terms

of the compulsory policy itself, the premium rate, and the

amount of coverage.

6.16 The Puerto Rico Mandatory Liability Insurance Uniform

Policy, the policy defining the terms of the compulsory


25

liability insurance, is set forth in the Insurance

Commissioner's rules. Rule LXX, Art. 22. This Uniform Policy is

the sole written contract between the insured and the JUA. Id.

Law 253 provides that such Uniform Policy shall be subject to

the provisions of Chapter 11 of Title 26 of Puerto Rico Laws

Annotated. 26 P.R. Laws Ann § 8054(c). Chapter 11, in turn,

requires the issuance of a paper policy to the insured. 26 P.R.

Laws Ann § 1114. In reality, however, a paper copy of the

Uniform Policy is not issued to the insured.

6.17 In Arroyo-Melecio, the First Circuit squarely held

that, while created by law, the JUA is "private in nature, for

profit, and ... subject to the provisions of the [Insurance]

Code applicable to insurers." 398 F.3d, at 62, quoting Rule LXX,

Art. 2(c). See, also, Asociacion De Subscripcion Conjunta Del

Seguro De Responsabilidad Obligatorio v. Flores Galarza, 484

F.3d 1, 20 (1st Cir. 2007) (same).

6.18 The provisions of the Puerto Rico Insurance Code

relevant to the facts object of this action are listed below.

A. Article 3.290, which requires that all insurance business be transacted through resident authorized agents or broker producers, in its relevant part, states the following:

(1) No insurer may effectuate any direct insurance upon or relative to any person, property or other material object of insurance that resides, is located in or is to be carried out in Puerto Rico, nor any insurance related thereto, except through an


26

authorized representative of said insurer residing in Puerto Rico.

26 P.R. Laws Ann. § 329(a).

B. Article 11.14 requiring the issuance of an insurance policy and specifying its contents, in its relevant part, states the following:

(1) The written instrument in which a contract of insurance is set forth is the policy.

(3) The policy shall specify:

(a) The names of the parties to the contract, and the status of any party where such status is material to the contract. The policy shall be headed by the insurer's name.

(b) The subject of the insurance.

(c) The hazards insured against.

(d) The amount of the insurance and benefits.

(e) The time at which the insurance thereunder takes

effect and the period during which the insurance is to continue.

(f) A statement of the premium, and the premium rate

if other than life, disability, or title insurance. ... .

(g) The conditions pertaining to the insurance.

26 P.R. Laws Ann § 1114.

C. Article 27.160 regarding illegal dealing in premiums,

which reads, in its relevant part, as follows: (2) No person shall collect as premium or charge for insurance any sum in excess of the amount actually expended or in due course to be expended for insurance applicable to the subject on account of which the premium was collected or charged.


27

(3) Any sum collected as premium or charge for insurance in excess of the amount actually expended for insurance or for medical examination in the case of life insurance, applicable to the subject on account of which the premium or charge was collected shall be returned to the person entitled thereto within thirty (30) days from the date in which it is requested, and if not requested, within the term of ninety (90) days.

Any person who fails to return said sums within the term set forth in this subsection shall be bound to pay legal interest on the amount to be returned.

26 P.R. Laws Ann. § 2716(2)-(3). 6.19 The OIC’s Interpretive Rulings of Article 27.160,

regarding the charging of broker’s fees for insurance coverage,

provides that in such cases where a broker is not used -- as the

exception to the rule requiring that all policies be transacted

through brokers (Article 3.290) -- the charging of broker’s fees

would violate Article 27.160.

6.20 On April 29, 2009, as result of the First Circuit

holding in Flores Galarza, supra, to the effects that the JUA

operates as a private enterprise and is, in fact, a private

enterprise, and that the premiums collected by concept of

compulsory liability insurance are, likewise, of a private

nature, the Commonwealth Legislature amended those provisions of

Law 253 affected by such judicial determination See, Statement

of Purposes, Act 347 of April 29, 2009.


28

VII. DEFENDANTS’ SCHEME TO DEFRAUD

7.1 The Individual Plaintiffs (“Plaintiffs”) bring this

action on behalf of themselves and two Classes of similarly

situated persons (“Class Members”) seeking redress for the

illegal acts of the Defendants, which have resulted in a loss of

their property, and for declaratory and injunctive relief to end

those practices and prevent further losses.

7.2 From on or about 1997, and up to the present time, the

Defendants herein, at the same or different points in time,

knowingly, intentionally and unlawfully, aided and abetted,

conspired and associated in fact between themselves, through

their ENTERPRISE, to confederate and agree with each other, for

the purpose of devising, or intending to devise a scheme or

artifice to defraud and to obtain money, by means of false or

fraudulent pretenses, representations or promises; and, directly

participated in, or aided and abetted, counseled, commanded,

induced, procured or caused and conspired in, the perpetration of

such scheme to defraud and to obtain money.

7.3 The scheme to defraud and to obtain money consisted in

the following:

a) Defendants, utilizing the motor vehicle licenses or registrations printed by the DTPW as a conduit to create an appearance of unquestionable legitimacy, billed all Puerto Rican motor vehicle owners for compulsory liability insurance coverage at the time of the issuance or renewal of such licenses or registrations;


29

b) Defendants willfully and wrongfully charged all motor vehicle owners therein an 8% of the dollar premium by concept of an “acquisition cost” for services of brokers that they very well knew were not going to be used by the insured, plus an amount estimated in 4% of the do1lar premium by concept of an “administrative cost" for the issuance of paper copies of policies, which they never intended to issue to the insured; and,

c) thereafter, Defendants, illegally, unlawfully,

knowingly, deliberately and maliciously deprived said motor vehicle owners of their monies, by not reimbursing them the price they paid for such non-incurred costs included in the annual insurance premium rate, amounting to 12% of its cost, thereby embezzling such monies for the pecuniary benefit and economic interest of the members of the ENTERPRISE (the “Scheme to Defraud”).

7.4 The Defendants had a statutory duty, under

Commonwealth Law, to return to the Puerto Rican motor vehicle

owners the costs charged for brokerage services that were not

rendered and the costs charged for issuance of policies that

were not incurred. See, 26 P.R. Laws Ann. § 2716(2)-(3) (Illegal

Dealings in Premiums).

7.5 The collection of the acquisition cost and the

administrative cost without the corresponding refund of the

portion of the premium not incurred constitutes a violation to

the provisions of the Puerto Rico Insurance Code. Id.

7.6 The use of the mails was an integral and essential

part of the Scheme to Defraud since the billing for the


30

compulsory liability insurance was done through the United

States Postal Service.

7.7 In furtherance of the Scheme to Defraud, Defendants

caused the DTPW to place in the post offices or authorized

depositories for mail matter envelopes, containing the motor

vehicles licenses or registrations that included the billing for

the annual premium for the compulsory insurance policy, which

were thereafter delivered, by the United States Postal Service,

to all motor vehicles owners in Puerto Rico.

VIII. THE ENTERPRISE

8.1 At all times relevant herein, the Defendants

associated in fact for the common purpose of furthering and

engaging in the Scheme to Defraud.

8.2 The ENTERPRISE is an association-in-fact, an entity

separate from and bigger than any of the “persons” (the

Defendants and other members of the Enterprise) comprising the

same; where, at all times relevant herein, these “persons” were

systematically linked with overlapping leadership, structural

and financial ties, and continuing coordination.

8.3 At all times relevant herein, the ENTERPRISE was

composed by the association in fact of the JUA and its former or

current members, CAICO, CHARTIS (formerly AIG), COOPERATIVA,

INTEGRAND, MAPFRE–PRAICO (formerly PRAICO), NATIONAL, OPTIMA,

REAL LEGACY, TRIPLE-S, UNIVERSAL, ROYAL & SUN, PREFERRED RISK,


31

ALLSTATE, GENERAL ACCIDENT and NATIONWIDE, together with Garcia,

CRUZ-COLON, Ortiz, Miranda-Casañas, Terrassa and other unnamed

and yet unknown individuals, partnerships, corporations or

associations (the “ENTERPRISE”). It includes the forenamed

Defendants and associated individuals, as well as persons who

have not violated RICO.

8.4 Structurally, the ENTERPRISE is an association

comprised of the Defendants and other persons and entities whose

common link is the purpose and nature of their business, i.e.,

selling motor vehicle compulsory liability insurance policies

and providing coverage to the insured.

8.5 The association-in-fact Enterprise was a formal

legitimate ongoing organization, functioning as a continuing

unit, pursuing an interrelated course of conduct, and with a

common or shared purpose and continuity of structure and

personnel.

8.6 The forenamed Defendants, as members of the

ENTERPRISE, used said formal and legitimate association-in-fact

ENTERPRISE as an instrument to perpetrate the Scheme to Defraud,

through the pattern of racketeering activity, as fully described

herein after. The aim of the Scheme to Defraud was the sale of

motor vehicle compulsory liability insurance policies

fraudulently containing hidden charges for non-incurred costs to

derive racketeering income.


32

8.7 The ENTERPRISE is engaged in interstate commerce

through the activities of its associates, as described herein

before.

IX. COMMON FACTUAL ALLEGATIONS

9.1 Law 253 created the JUA as a residual market insurer

for high-risk drivers who had been rejected by traditional

insurance carriers. This statute sought to encourage competition

in compulsory liability insurance for non-high-risk drivers

between the traditional insurers themselves and between them and

the JUA. In reality, however, this has not been the practice,

and the JUA has been selling the compulsory liability insurance

to all Puerto Rican drivers. In doing so, the JUA changed its

nature as a residual insurer to a primary insurer and

monopolized this market, which has facilitated the execution of

the Scheme to Defraud.

9.2 Prior to January 1, 1998, when Law 253 would be in

effect, the Office of the Insurance Commissioner (“OIC”)

commissioned an advisory or technical committee (“TC”) from

different sectors of the local insurance community, in order to

rollout and implement Law 253.

9.3 Membership of the TC included, among others: PRAICO

(now known as MAPFRE–PRAICO), GENERAL ACCIDENT, TRIPLE-S,

GENERAL ACCIDENT, Association of General Agents of Miscellaneous

Insurances (“Association”), Professional Insurance Agents of


33

Puerto Rico and the Caribbean, Inc. (Professional”), Saldaña &

Associates, Inc., (“Saldaña”), Antilles Insurance Company

(“Antilles”), Toledo, Del Valle & Company, and First Insurance

Group, Inc. (“First”).

9.4 Early meetings between Insurance Commissioner Garcia

and the TC began at least in early October 1996, and extended to

November 1997. Among topics of discussion, were the

“coordination” of Law 253 insurance and traditional insurance

coverage.

9.5 On March 17, 1997, in furtherance of the Scheme to

Defraud, Insurance Commissioner Garcia, on behalf of the OIC,

met with the members of the TC -- including, PRAICO, GENERAL

ACCIDENT, TRIPLE-S and GENERAL ACCIDENT -- and representatives

of insurance companies AIG (now known as CHARTIS), INTEGRAND,

NATIONAL, First American Company and Royal Insurance Company of

Puerto Rico; and, acting in concert, jointly, aiding and

abetting and conspiring with each other, they all agreed that

all motor vehicle owners would pay the premium for compulsory

liability insurance coverage during the year 1997, at the time

each acquired or renewed the vehicle's license -- even those who

had traditional insurance policies and should have been exempted

from paying duplicative premiums for insurance coverage in the

year 1997. Yet Law 253 provided that it would be in effect and


34

implemented in the year 1998. These were overt acts committed as

part of the conspiracy to violate RICO.

9.6 In furtherance of the Scheme to Defraud, a subsequent

TC and OIC meeting was held on March 21, 1997, wherein the

following were present: Insurance Commissioner Garcia; Eunice

Betancourt from PRAICO; Edwin Diaz from Association; Carlos

Figueroa from Professional; Carmen Figueroa from TRIPLE-S;

Rafael Laffitte from Saldaña; Ramon Antonio Perez from First;

Noemi Ramirez from Antilles; and, Cristina Moran, as Advisor.

Ortiz, Executive President of JUA, appeared as a guest. Arleen

Medina from COOPERATIVA was excused from the meeting.

9.7 During the TC March 21 meeting, it was agreed that the

Model Mandatory Coverage Application and Policy, which had been

previously prepared by the TC, would be a guide for the

structuring of the application and policy that the JUA and the

traditional insurers, individually, could use in the issuance of

the compulsory insurance policy. It was further agreed that the

TC would draft a letter for the traditional insurance carriers,

notifying them that payment for the portion of the premium

corresponding to compulsory liability insurance could not be

differed and had to be paid at the moment of renewal or issuance

of the license; and, that the TC would draft a cover letter to

all the traditional insurance carriers, informing them about the

implementation of the compulsory liability insurance system,


35

accompanied by the Model Mandatory Coverage Application and

Policy. These were overt acts committed as part of the

conspiracy to violate RICO.

9.8 On April 7, 1997, the TC held another meeting, wherein

the following were present: Insurance Commissioner Garcia;

Eunice Betancourt from PRAICO; Edwin Diaz from Association;

Carlos Figueroa from Professional; Carmen Figueroa from TRIPLE-

S; Rafael Laffitte from Saldaña; Arleen Medina from COOPERATIVA;

Noemi Ramirez from Antilles; and, Cristina Moran, as Advisor.

Ortiz, Executive President of JUA, appeared as a guest.

9.9 The main topic of discussion in the April 7 meeting,

was the procedure that should be followed to coordinate the

payment of the compulsory liability insurance coverage and the

payment of the traditional insurance policy, in light of the

requirements and limitations expressed by Treasury and the DTPW.

To that end, among several alternatives, the members of the TC

selected and suggested to Insurance Commissioner Garcia the

following procedure in order to avoid duplicative payments of

premiums for compulsory insurance coverage:

Everyone pays his/her insurer the premium of the traditional liability insurance or the premium of the compulsory liability insurance, depending on the type of insurance each individual selects, and receives a certificate of insurance as evidence of payment. The insured shall present the certificate, at payment centers, for the renewal of the license sticker and will not have to pay any money. The procedure shall be similar


36

to the presentation of the certificate of inspection of the vehicle.

TC’s Act No. 42 of April 7, 1997.

9.10 The JUA’s Ortiz voted against the procedure approved

by the TC in Act No. 42.

9.11 On or about April 9 or 10, 1997, in furtherance of the

Scheme to Defraud, the Board of Directors of the JUA (comprised

of Terrassa of PRAICO, Miranda-Casañas of UNIVERSAL, Quiñones of

COOPERATIVA, Hanftwurzel of GENERAL ACCIDENT, Rodriguez-Forteza

and Rodriguez) held an emergency meeting. Insurance Commissioner

Garcia and Ortiz, Executive President of JUA, participated in

this meeting.

9.12 During this early April, 1997 meeting, PRAICO,

UNIVERSAL, COOPERATIVA, GENERAL ACCIDENT, JUA and the OIC,

acting in concert, jointly, aiding and abetting and conspiring

with each other, rejected the procedure approved by the TC in

Act No. 42 to channel the payments of the premiums of the

compulsory and traditional insurance policies through the

respective particular insurer of each motor vehicle owner. These

were overt acts committed as part of the conspiracy to violate

RICO.

9.13 On April 16, 1997, in furtherance of the Scheme to

Defraud, Garcia, through the OIC, acting in concert, jointly,

aiding and abetting and conspiring with PRAICO, UNIVERSAL,


37

COOPERATIVA, GENERAL ACCIDENT and JUA, officially adopted the

JUA’s Board of Director’s rejection of the procedure approved by

the TC in Act No. 42. This was an overt act committed as part of

the conspiracy to violate RICO.

9.14 In December 1997, the Legislature of the Commonwealth

of Puerto Rico approved a bill granting a 100% tax exemption for

the profits obtained by the JUA from the sale of compulsory

liability insurance policies and the dividends declared by it to

the member insurance companies.

9.15 Coincidentally, in December of 1997, in furtherance of

the Scheme to Defraud, the Board of Directors of the JUA

(comprised of Terrassa of PRAICO, Miranda-Casañas of UNIVERSAL,

Quiñones of COOPERATIVA, Hanftwurzel of GENERAL ACCIDENT,

Rodriguez-Forteza and Rodriguez) held a meeting, with the

participation of Insurance Commissioner Garcia and Ortiz,

Executive President of the JUA.

9.16 During this December 1997 meeting, PRAICO, UNIVERSAL,

COOPERATIVA, GENERAL ACCIDENT, the JUA and the OIC, acting in

concert, jointly, aiding and abetting and conspiring with each

other, agreed that the JUA would be the only insurer that would

provide and issue compulsory liability insurance coverage to

motor vehicle owners in Puerto Rico. These were overt acts

committed as part of the conspiracy to violate RICO.


38

9.17 Shortly thereafter, in December 1997, in furtherance

of the Scheme to Defraud, during a meeting with the TC and

members of the JUA, Insurance Commissioner Garcia, announced

that the JUA would be the only insurer that would provide Law

253 insurance coverage in Puerto Rico and that all payments of

premiums would be channeled through the DTPW. This was an overt

act committed as part of the conspiracy to violate RICO.

9.18 In or about December 1997, in furtherance of the

Scheme to Defraud, Insurance Commissioner Garcia, through the

OIC, acting in concert, jointly, aiding and abetting and

conspiring with PRAICO, UNIVERSAL, COOPERATIVA, GENERAL ACCIDENT

and the JUA, promulgated Regulation LXX. This regulation

established that every motor vehicle owner shall pay the premium

corresponding to the compulsory liability insurance to the

Secretary of the Treasury at the time of the issuance or renewal

of the license or registration; and, thereafter, the Secretary

of the Treasury will transfer the funds of the premiums paid to

the JUA for its eventual distribution among itself and the

traditional insurers. Rule LXX, Art. 9(a). Every motor vehicle

for which the premium has been paid is considered to be insured

by the JUA (unless its owner has purchased a traditional

insurance policy). Id., Art. 12(a). Further, the regulation sets

forth the Puerto Rico Mandatory Liability Insurance Uniform

Policy, defining the terms of the compulsory liability


39

insurance, as the sole written contract between the insured and

the JUA. Id., Art. 22. The promulgation of Regulation LXX was an

overt act committed as part of the conspiracy to violate RICO.

9.19 The effect of the foregoing was to change the nature

of the JUA from a residual to a primary insurer, able to insure

the motor vehicles directly, even if the traditional insurers

have not rejected the same; to allow the JUA to effectuate

insurance coverage directly, without the use of any agent or

broker, eliminating the latter from the compulsory liability

insurance scheme; and, to establish one uniform compulsory

liability insurance policy applicable to all, deliberately

obviating the issuance of individual policies to the insured.

9.20 Prior to January 1998, before Law 253 came into

effect, the OIC issued notices advising that all motor vehicle

owners would make the payments for compulsory liability coverage

to the Department of the Treasury, as billed in the motor

vehicle license or registration.

9.21 Even before the implementation of Law 253 -- which

mandated the use of insurance brokers to lower the cost of

insurance on the consumer, maximize coverage and foster

competition; and, which required the issuance of individual

policies -- the Defendants, by agreeing that the JUA would be

the only insurer providing compulsory liability insurance

coverage, through one uniform written policy, which all motor


40

vehicle owners had to purchase at the time of the renewal or

issuance of the registrations or licenses, conjured up their

Scheme to Defraud. The utilization of insurance brokers and the

issuance of paper policies were obviated from the compulsory

liability insurance system. However, as shown below, all motor

vehicle owners would be forced to pay the JUA brokerage fees and

policy costs as part of the premium without the participation of

any broker or the issuance of any paper policy in the process,

in violation of the Puerto Rico Insurance Code. The motor

vehicle owners were to pay such fees immediately and in full to

the Secretary of the Treasury in order to be authorized to drive

their vehicles through the Puerto Rico thoroughfares.

9.22 The Defendants, the JUA, PRAICO (now known as MAPFRE–

PRAICO), UNIVERSAL, COOPERATIVA, GENERAL ACCIDENT, TRIPLE-S,

INTEGRAND, NATIONAL and AIG (now known as CHARTIS), jointly with

the Insurance Commissioner Garcia and the other forenamed

individuals and entities, conjured and designed these artifices

to defraud and obtain money, which formed part of the Scheme to

Defraud, with scienter and deliberate intent to fraudulently

induce and force the Plaintiffs and Class Members purchasing the

compulsory insurance policy to pay brokerage fees and policy

costs -- disguised as legitimate charges in the license or

registration printed and mailed to them by the DTPW -- for

services that the Defendants had no intention of providing or


41

making available to them, as part of the annual premium rate, to

the Department of the Treasury, which would then transfer by

wire such funds to the JUA. Once in the JUA’s coffers, the

members of the ENTERPRISE misappropriated the monies so paid by

the Plaintiffs and Class Members for brokerage services that

were never rendered and paper policies that were never issued.

9.23 Billing the Plaintiffs and Class members by means of

license and registrations issued by the DTPW and compelling them

to pay the mandatory insurance premium to the Department of the

Treasury had the effect of legitimizing the Scheme to Defraud by

creating the appearance that it had been approved, sanctioned,

and condoned by two State government agencies as lawful.

9.24 On August 3, 1999, in furtherance of the Scheme to

Defraud, Ortiz of JUA wrote and mailed a letter to Insurance

Commissioner Garcia notifying the OIC that the Board of

Directors (comprised of Terrassa of PRAICO, Miranda-Casañas of

UNIVERSAL, Quiñones of COOPERATIVA, Gonya of NATIONWIDE, Ortiz

of JUA, Rodriguez-Forteza and Rodriguez) had recently approved

the distribution of gains or profits from the sale of compulsory

insurance policies; and, requesting the OIC to furnish to the

JUA the distribution of the premium dollar and the proportional

participation of each of its members for the year 1998. As Ortiz

very well knew, the profits obtained from the sale of policies

included proceeds from charges for brokerage services not


42

performed and for policy costs not incurred. This mailing was

delivered in violation of the Mail Fraud Statute, 18 U.S.C. §

1341. Further, this was an overt act committed as part of the

conspiracy to violate RICO.

9.25 On August 18, 1999, in furtherance of the Scheme to

Defraud, Garcia wrote and mailed to Ortiz a letter approving the

distribution of profits among the members of the JUA for the

year 1998, because the same conformed to the distribution of the

premium dollar underlying the premium charged for the compulsory

insurance. This mailing was delivered in violation of the Mail

Fraud Statute, 18 U.S.C. § 1341. Further, this was an overt act

committed as part of the conspiracy to violate RICO.

9.26 At all times material herein -- as stated in the

August 18, 1999 letter, from Garcia to Ortiz -- the distribution

of the premium dollar underlying the premium annually charged

for the compulsory insurance, as sanctioned by the OIC has been

the following one:

Concept Percent Acquisition Cost 8% Taxes, Licenses and Charges 1% Administrative cost 7% Gain 5% Subtotal 21% Losses & Adjustment for Losses 79% TOTAL: 100%


43

9.27 According to the distribution of the premium dollar

established by the OIC, 8% is destined to cover the “acquisition

cost” consisting in the commission to be paid to the insurance

broker and other expenses inherent to the performance of the

broker’s duties, as specifically acknowledged by the Insurance

Commissioner Garcia, on August 25, 2000, in Ruling No. CA-8-

1578-2000.

9.28 The JUA’s annual statements for the period covering

from 1998 through to 2010, disclosed that it only paid

commissions amounting to $8,756.00 to agents as brokerage fees

in the year 2000, stopping thereafter to make any additional

payment by such concept, despite the mandates of the

Commonwealth’s Insurance Code that brokers had to be used for

the sale of the insurance policies.

9.29 According to the distribution of the premium dollar

established by the OIC, 7% is earmarked to cover the

“administrative cost” for the issuance of a paper copy of the

insurance policy -- as mandated by 26 P.R. Laws Ann § 8054(c) in

conjunction with Chapter 11 of Title 26 of Puerto Rico Laws

Annotated -- and related expenses. However, the estimated real

cost incurred by the JUA was a 3%, since it did not issue any

policy nor mailed any to the insured, as it is the custom with

other insurances. By consequence, there is a 4% of

administrative cost of the premium dollar that was not spent.


44

During such 12-year period, the traditional insurer Defendants

did not have any administrative cost, or if they had, it was

very small.

9.30 According to the distribution of the prime dollar

established by the OIC, 5% was supposed to constitute the gain

or profit to the insurer for the sale of the compulsory

liability insurance policy.

9.31 It follows from the forgoing that from 1998 to 2010, a

12% of the premium dollar destined for acquisition costs and

administrative costs was not incurred by Defendants. Although

the JUA received completely the $99 and $148 annual premiums and

distributed substantial profits from those proceeds to the

Defendant members of the ENTERPRISE, the funds of expenses not

incurred were not reimbursed. This conduct constitutes a

violation to Article 27.160 of the Insurance Code.

9.32 Moreover, the profit or gain derived by the Defendant

members of the ENTERPRISE from the sale of compulsory liability

insurance policies in reality amounted to 17% of the prime

dollar, instead of the 5% allowed by the OIC.

9.33 Table I below details the collected premiums, plus the

acquisition costs not incurred that were collected by the

Defendants and not reimbursed to the Representative Plaintiffs

and Class Members in violation to Article 27.160 of the

Insurance Code.


45

TABLE I

Year Premiums Percentage Acquisition Cumulative Percentage Interest Acquisition Collected Acquisition Costs Acquisition Interest Costs Plus Costs Costs Not Interests Incurred 1998 $219,486,751 8.00% $17,558,940 $17,558,940 6.00% $1,053,536 $18,612,476 1999 $154,260,785 8.00% $12,340,863 $29,899,803 6.00% $1,793,988 $14,134,851 2000 $150,211,815 8.00% $12,016,945 $41,916,748 6.00% $2,515,005 $14,531,950 2001 $165,764,800 8.00% $13,261,184 $55,177,932 6.00% $3,310,676 $16,571,860 2002 $178,840,198 8.00% $14,307,216 $69,485,148 6.00% $4,169,109 $18,476,325 2003 $175,829,609 8.00% $14,066,369 $83,551,517 6.00% $5,013,091 $19,079,460 2004 $186,627,928 8.00% $14,930,234 $98,481,751 6.00% $5,908,905 $20,839,139 2005 $188,909,000 8.00% $15,112,720 $113,594,471 6.00% $6,815,668 $21,928,388 2006 $198,456,178 8.00% $15,876,494 $129,470,965 6.00% $7,768,258 $23,644,752 2007 $186,807,772 8.00% $14,944,622 $144,415,587 6.00% $8,664,935 $23,609,557 2008 $202,428,047 8.00% $16,194,244 $160,609,831 6.00% $9,636,590 $25,830,834 2009 $203,642,295 8.00% $16,291,384 $176,901,214 6.00% $10,614,073 $26,905,456 2010 $192,218,965 8.00% $15,377,517 $192,278,731 6.00% $11,536,724 $26,914,241 TOTALS: $2,403,484,143 $192,278,731 $78,800,558 $271,079,290

9.34 As shown in Table I above, and Table II below, the

premiums collected in the 1998-2010 period amount to

$2,403,484,143.00. The 8% in the column under the heading

“percentage acquisition costs” in Table I represents the

percentage of the premium dollar charged for the insurance

broker’s commission. The cumulative acquisition costs collected

from the insured motor vehicle owners, which in reality were not

incurred by the Defendants, add up to $192,278,731.00. These

monies were never reimbursed. The monies collected under the

guise of “acquisition costs” plus the accrued interests totalize

$271,079,290.00.

9.35 Table II below details the collected premiums, plus

the part of the administrative costs not incurred that were

collected by the Defendants and not reimbursed to the


46

Representative Plaintiffs and Class Members in violation to

Commonwealth Law.

TABLE II

Year Premiums Percentage Administrative Cumulative Percentage Interest Administrative Collected Administrative Costs Administrative Interest Costs Plus Costs Costs Not Interests Incurred 1998 $219,486,751 4.00% $8,779,470 $8,779,470 6.00% $526,768 $9,306,238 1999 $154,260,785 4.00% $6,170,431 $14,949,901 6.00% $896,994 $7,067,425 2000 $150,211,815 4.00% $6,008,473 $20,958,374 6.00% $1,257,502 $7,265,975 2001 $165,764,800 4.00% $6,630,592 $27,588,966 6.00% $1,655,338 $8,285,930 2002 $178,840,198 4.00% $7,153,608 $34,742,574 6.00% $2,084,554 $9,238,162 2003 $175,829,609 4.00% $7,033,184 $41,775,758 6.00% $2,506,545 $9,539,730 2004 $186,627,928 4.00% $7,465,117 $49,240,875 6.00% $2,954,453 $10,419,570 2005 $188,909,000 4.00% $7,556,360 $56,797,235 6.00% $3,407,834 $10,964,194 2006 $198,456,178 4.00% $7,938,247 $64,735,483 6.00% $3,884,129 $11,822,376 2007 $186,807,772 4.00% $7,472,311 $72,207,793 6.00% $4,332,468 $11,804,778 2008 $202,428,047 4.00% $8,097,122 $80,304,915 6.00% $4,818,295 $12,915,417 2009 $203,642,295 4.00% $8,145,692 $88,450,607 6.00% $5,307,036 $13,452,728 2010 $192,218,965 4.00% $7,688,759 $96,139,366 6.00% $5,768,362 $13,457,121 TOTALS: $2,403,484,143 $96,139,366 $39,400,279 $135,539,645 9.36 The 4% in the column under the heading “percentage

administrative costs” that appears in Table II represents the

percentage of the premium dollar the Defendants charged by

concept of issuing and sending the paper uniform policies to the

insured motor vehicle owners. The cumulative administrative

costs collected from the insured motor vehicle owners amounts to

$96,139,366.00. In reality, the Defendants did not incur in

these costs, since the compulsory insurance policies were never

issued. The cost for this item was never reimbursed either. The

monies collected under the guise of administrative costs plus

accrued interests totalize $135,539,645.00.


47

9.37 The grand total of costs collected and not reimbursed

is $288,418,097.00. Accrued interests amount to $118,200,837.00.

The sum of these amounts yields $406,618,935.00. Therefore, the

injuries suffered by the Representative Plaintiffs and Class

Members during the twelve-year period in question as result of

the collection of monies in excess and in violation to

Commonwealth law totalize $406,618,935.00.

9.38 Article 27.160 of the Insurance Code prohibits the

collection as premium of any amount that is not “actually

expended or in due course to be expended.” 26 P.R. Laws Ann. §

2716(2)-(3). It also mandates the return of the premium or

charge for insurance of any sum in excess of the amount really

spent. Id. The Defendants failed to comply with the express

mandate of the law, and in the process they profited with

$406,618,935.00, which they had to return to the Plaintiffs and

the Class Members by express disposition of Article 27.160.

Nevertheless, the Defendants have made no effort to reduce the

compulsory liability premium, enriching themselves in millions

of dollars at the expense of the Puerto Rican motor vehicle

owners.

9.39 Originally conceived as a residual insurer, the JUA

was expected to sustain economic losses, which were supposed to

be spread among all the traditional insurers that comprise it.

The reality has been just the opposite. Since the inception of


48

the compulsory insurance system, the JUA has gained

extraordinary profits from the compulsory liability insurance

scheme, held valuable investments and distributed substantial

amounts in dividends to the traditional insurer Defendants.

9.40 According to the DTPW records, presently 2.4 million

motor vehicles exist in Puerto Rico, of which only sixteen

percent (16%) have traditional insurance. Between the years 1998

and 2010, the income in annual premiums for the JUA and the

traditional insurer Defendants, as shown above in Tables I and

II, exceeded 2.4 billion dollars ($2,400,000,000.00). Of that

amount, the Defendants misappropriated more than 288 million

dollars in acquisition costs and administrative costs collected,

but not really incurred.

9.41 From 1998 to 2010, as shown in Table III below, the

JUA reported in its financial statements net income derived from

underwriting compulsory insurance policies and investments in

the total amount of $452,635,690.00, and declared therein the

distribution of $102,737,554.00 in dividends among the Defendant

members of the ENTERPRISE: CAICO, CHARTIS (formerly known as

AIG), COOPERATIVA, INTEGRAND, MAPFRE–PRAICO (formerly known as

PRAICO), NATIONAL, OPTIMA, REAL LEGACY, TRIPLE-S, UNIVERSAL,


NATIONWIDE.


49

Table III Year Gross Income Net Income Dividends 1998 $31,084,738 Tax Exempt $31,084,738 $0 1999 $31,699,793 Tax Exempt $31,699,793 $6,866,837 2000 $28,393,696 Tax Exempt $28,393,696 $7,597,475 2001 $28,418,116 Tax Exempt $28,418,116 $7,666,401 2002 $11,785,549 $8,460,758 $7,885,243 2003 $21,446,479 $15,641,566 $7,898,813 2004 $13,096,583 $11,166,583 $8,717,221 2005 $8,575,687 $8,404,910 $9,063,916 2006 $26,342,497 $16,970,636 $7,593,556 2007 $49,804,446 $33,681,536 $9,728,886 2008 $75,345,496 $47,497,598 $9,457,678 2009 $79,073,396 $54,697,238 $10,079,413 2010 $47,569,214 $33,655,914 $10,182,115 TOTAL $452,635,690 $349,773,082 $102,737,554 9.42 In furtherance of the Scheme to Defraud, the

Defendants JUA, CAICO, CHARTIS (formerly known as AIG),

COOPERATIVA, INTEGRAND, MAPFRE–PRAICO (formerly known as

PRAICO), NATIONAL, OPTIMA, REAL LEGACY, TRIPLE-S, UNIVERSAL,


NATIONWIDE, acting in concert, jointly, aiding and abetting and

conspiring with each other, knowingly and deliberately, failed,

and still continue to fail, to comply with their statutory duty

to return the monies collected for costs that were not incurred;

and, instead, have unlawfully kept and distribute among

themselves millions of dollars that legally correspond to the

insured, the reimbursement of which is the object of this legal

action.


50

X. THE PREDICATE ACTS

10.1 In furtherance of the Scheme to Defraud, the

Defendants and the other members of the ENTERPRISE, knowingly,

intentionally and unlawfully, aided and abetted, conspired and

agreed, with each other, to attempt to commit, and each of them,

in fact, did commit, as principals, the predicate acts of

racketeering detailed hereunder, in violation of 18 U.S.C. § 2.

10.2 In addition, in furtherance of the Scheme to Defraud,

each of the Defendants, all of them members of the ENTERPRISE,

conspired, confederated and agreed, with each other, to attempt

to commit, and did commit, the predicate acts of racketeering

detailed hereunder, and, in doing so, violated the RICO

prohibitions, as defined in 18 U.S.C. § 1962.

10.3 Whenever it is alleged in the complaint that any

Defendant did any act or thing, it is meant that it, its

Directors, Officers, agents, employees, or the Directors,

Officers, agents or employees of its subsidiaries or affiliates,

performed or participated in such act or thing, and in each

instance that such act or thing was authorized or ratified by,

and done on behalf of, that Defendant.

10.4 In furtherance of the Scheme to Defraud, as explained

hereunder, the predicate racketeering acts consisted of millions

of violations of the Mail Fraud Statute, 18 U.S.C. § 1341 and

the Wire Fraud Statute, 18 U.S.C. § 1343.


51

10.5 In furtherance of the Scheme to Defraud, the

Defendants and the other members of the ENTERPRISE, also

knowingly, intentionally and unlawfully, aided and abetted and

conspired in the commission of millions of violations of Puerto

Rico statutes, including, among others, the following provisions

of the Insurance Code: 26 P.R. Laws Ann. § 329(a) (conducting

insurance transactions through unlicensed individuals); 26 P.R.

Laws Ann § 1114 (requiring the issuance of paper insurance

policies); and, 26 P.R. Laws Ann. § 2716(2)-(3) (illegal dealing

in premiums).

10.6 These violations were committed by the Defendants and

the other members of the ENTERPRISE, through, or by means of,

interrelated fraudulent artifices, all which formed part of the

same common plan or Scheme to Defraud.

XI. THE PATTERN OF RACKETEERING ACTIVITY

11.1 In the Scheme to Defraud, the millions of predicate

racketeering acts detailed herein below form a pattern, as

defined by 18 U.S.C. 1961(5), inasmuch as they have been

committed by the Defendants and the other members of the

ENTERPRISE, through continuous, uninterrupted, criminal

activity, which began on or around, 1998, which has continued up

to the present year, 2011, and which has a high risk of

continuing into the future.


52

11.2 In addition, within the Scheme to Defraud, as it is

shown herein below, the predicate acts are related given that

they have the following commonalties:

a) the same purpose or goal: to illegally collect charges from motor vehicle owners for costs not incurred as part of the insurance premiums, namely brokerage and administrative costs not incurred, and to keep the monies so obtained for the economic benefit of the Defendants, as members of the ENTERPRISE, when the Insurance Code prohibits such practice; b) the same results: to deprive said motor vehicle owners of their monies and the acquisition of such assets; c) the same participants: the Defendants and the defined ENTERPRISE; d) the same victims: the Plaintiffs and the Class Members; and, e) the same methods of commission: the Scheme to Defraud and the common predicate acts in furtherance thereof through the use of the mails.

11.3 These predicate racketeering acts are otherwise

interrelated by the foregoing distinguishing characteristics;

and, are not isolated events, since they were carried out for

the same purposes in a continuous manner throughout a

substantial period of time.

11.4 In the Scheme to Defraud, the continuity and

relatedness of these racketeering activities constitute a

pattern of racketeering activities within the meaning of 18

U.S.C. § 1961(5).


53

XII. CLASS ALLEGATIONS

12.1 Plaintiffs bring this action on their own behalf and,

pursuant to Rule 23(a), 23(b)(1)(A) & (B), 23 (b)(2) and/or

(b)(3) as a class action on behalf of the Class Groups defined

in Section III(A), supra. This Class seeks certification of

claims for declaratory and injunctive relief, and for damages

pursuant to 18 U.S.C. § 1962(a)(b)(c) & (d).

12.2 Each named Plaintiff possesses the same interests and

has suffered the same economic injury shared by all the Members

of the Class that he represents, which claims for damages and

equitable relief arise from the same operative facts and legal

theories detailed herein below.

A. RULE 23(a) NUMEROSITY

12.3 The Plaintiffs Classes are reasonably estimated to

consist of the owners of over 2,400,000 motor vehicles

registered in the DTPW as duly authorized to travel through

Puerto Rico thoroughfares, all with compulsory liability

insurance, such as the Plaintiff Representatives.

12.4 The exact total number of Class Members can be

reasonably ascertained from the records in the possession or

under the control of the Defendants and the DTPW.

12.5 The Members of the Group Classes are certainly so

numerous that joinder of all members is impracticable.


54

12.6 On the other hand, the identity and addresses of the

Members of the Classes are reasonably ascertainable and can be

readily identified from the business records maintained by the

Defendants and the DTPW.

12.7 Moreover, individual lawsuits by Class Members are not

practical due to the economic cost of the litigation, vis a vis,

the monetary value of most individual claims which otherwise

might well never be vindicated.

12.8 Finally, the reliefs sought by the Representative

Plaintiffs and to which Class Members are entitled are uniform

within the two separate Classes.

B. RULE 23(a) COMMONALITY OF FACTS AND LAW

12.9 The factual and legal issues raised in this complaint

are common to all Plaintiff Representatives and Class Members,

inasmuch as they arise from the same common nucleus of operative

facts, the Scheme to Defraud and the different artifices carried

out by the Defendants and the members of the ENTERPRISE to

achieve the objectives of such scheme (to acquire and maintain

control over the ENTERPRISE, to capitalize the ENTERPRISE

through fraudulent artifices, and to fraudulently deprive the

Class Members of their monies for the Defendants’ and the

ENTERPRISE'S economic benefit).

12.10 The Plaintiffs and Class Members have been all

injured in their property as a direct result of the Defendants’


55

and the ENTERPRISE'S Scheme to Defraud and the artifices used by

them to carry it out. They have all been object of the

collection of a premium in excess of the monetary amount really

spent or in the process of being spent by Defendants for the

compulsory liability insurance without having received the

refund or return required by law. The Scheme to Defraud and

artifices carried out by the Defendants arise from a single

course of conduct that is identical for each Plaintiff and the

two Classes that they represent. The illegal retention of these

monies has resulted in exorbitant gains for the Defendants.

12.11 The adjudication of the issue whether the Defendants

and the other members of the ENTERPRISE acted throughout the

alleged patterns of racketeering activity involves issues of

fact and law that are common to all Plaintiffs and Class

Members.

C. RULE 23(a) TYPICALITY

12.12 The named Plaintiff Representatives and the Class

Members, each and all, have tangible and legitimate actionable

claims and interests at stake in this action.

12.13 The claims of the named Plaintiff Class

Representatives are typical of the claims of the absent Class

Members, all of whom have a common origin and share a common

basis of fact and law.


56

12.14 The claims of the named Plaintiff Class

Representatives and Class Members arise from the same Scheme to

Defraud and the artifices carried out by Defendants and the

members of the ENTERPRISE to achieve its goal. That is, the

claims of the named Plaintiff Class Representatives and Class

Members arise from the same patterns of racketeering activity

and are based upon the same legal theories which are alleged to

be in violations of the RICO Act. Thus, the individual

characteristics of the named Plaintiffs are typical of the ones

of the Class Members that they represent.

12.15 Defendants have acted in the same way toward

Plaintiffs and the members of the Classes they represent. As a

result thereof, each named Plaintiff has been personally injured

by the illegal conduct of Defendants in a way typical to the

injury caused to the members of the Classes they represent.

12.16 The claims of the named Plaintiffs will necessarily

require proof of the same material and substantive facts, rely

upon the same remedial theories, and seek the same relief than

the claims that can be made by the Class Members they represent.

12.17 The claims and remedial theories pursued by the named

class representatives are sufficiently aligned with the

interests of absent Class members to ensure that the claims of

the Class will be prosecuted with diligence and care by

Plaintiffs as representatives of the Class.


57

D. RULE 23(a) ADEQUACY OF REPRESENTATION

12.18 The claims of the named Plaintiffs and the members of

the two Classes they are willing and prepared to represent are

so interrelated that the interests of the Class Members will be

adequately protected in their absence by Plaintiffs, complying

with all of the obligations and duties material thereto.

12.19 Plaintiffs have no interests adverse to the interests

of the Class Members. The self-interests of the named Class

Representatives are equal, and not antagonistic, to those of the

absent Class Members. The proposed representatives will, thus,

undertake to well and truly protect the interests of the absent

Class Members.

12.20 The named plaintiffs have engaged the services of the

undersigned counsels. Said counsels are experienced in complex

litigation, will adequately prosecute this action, and will

assert, protect and otherwise well represent the named Class

Representatives and absent Class Members.

E. RULE 23(b)(1)(A) & (B)

12.21 The prosecution of separate actions by individual

members of the Class would create a risk of adjudications with

respect to individual members of the Class, which would, as a

practical matter, be dispositive of the interests of the other

similarly situated members of the Class who are not parties to


58

the action, and/or could substantially impair or impede their

ability to protect their interests.

12.22 The prosecution of separate actions by individual

members of the Class would also create a risk of inconsistent or

varying adjudications with respect to individual Members of the

Class, which would establish incompatible standards of conduct

for the parties opposing the Class. Such incompatible standards

and inconsistent or varying adjudications, on what would

necessarily be the same issues of facts, evidence and theories

of law, would also create and allow to exist inconsistent and

incompatible rights within the Plaintiff Class.

F. RULE 23(b)(2)

12.23 Defendants have acted or refused to act on grounds

generally applicable to the Class, making final declaratory or

injunctive relief appropriate.

G. RULE 23(b)(3)

12.24 The questions of law and fact common to members of

the Classes predominate over any questions affecting only

individual members.

12.25 Under these circumstances, a class action is superior

to individual claims and may be the only practical method for

the fair and efficient adjudication of the controversies alleged

in this complaint, inasmuch as:


59

a. Individual claims by the Class Members are impractical as the costs of litigation may far exceed what any one plaintiff or Class member has at stake.

b. There has been no individual litigation over the federal

RICO violations raised herein, and individual Class Members should have no interest in prosecuting and controlling separate federal RICO actions.

c. The litigation of the federal RICO claims herein should be

concentrated in this forum, because all the parties are found within, and are under the jurisdiction of this District Court.

d. The proposed Class Action can be readily managed with the

assistance of the guidelines contained in the Manual for Complex Litigation adopted by the Federal Judicial Center.

XIII. LAW VIOLATIONS IN FURTHERANCE OF THE SCHEME TO DEFRAUD

COUNT I – VIOLATIONS TO SECTION 1962(c) OF RICO

A. THE ENTERPRISE:

13.1 The preceding paragraphs are hereby incorporated

herein as though fully set forth and are made a part of this

paragraph.

13.2 This cause of action arises under 18 U.S.C. § 1962(c)

and is asserted against all the Defendants.

13.3 Each of the Defendants, the JUA, CAICO, CHARTIS

(formerly known as AIG), COOPERATIVA, INTEGRAND, MAPFRE–PRAICO

(formerly known as PRAICO), NATIONAL, OPTIMA, REAL LEGACY,

TRIPLE-S, UNIVERSAL, PREFERRED RISK, ROYAL & SUN, ALLSTATE,

GENERAL ACCIDENT and NATIONWIDE, for purposes of this particular

cause of action, is or has been a "person" employed by or

associated with an enterprise engaged in, or the activities of


60

which affect, foreign or interstate commerce, and as such, has

conducted or participated, directly or indirectly, in the

conduct of such enterprise's affairs through a pattern of

racketeering activity as described herein before.

13.4 For purposes of this particular cause of action under

Section 1962(c), the ENTERPRISE is the association in fact

defined in Section VIII, supra.

13.5 Since on or around, 1997, the Defendants and the other

members of the ENTERPRISE, knowingly, intentionally and

unlawfully, aided and abetted, and conspired with each other, to

devise, or intend to devise the Scheme to Defraud, by which they

were to illegally obtain, acquire and maintain control of the

refundable payments paid by the Representative Plaintiffs and

Class Members, to later illegally keep those assets for their

own pecuniary benefit and interest.

13.6 In furtherance of their Scheme to Defraud and of their

conspiracy, and in order to effects its objectives, the

ENTERPRISE, knowingly, intentionally and unlawfully, aided and

abetted to commit, attempted to commit, conspired to commit, did

commit, and caused to be committed, the below enumerated overt

and/or predicate acts of racketeering activity to illegally

charge the Representative Plaintiffs and Class Members monies

for non-incurred costs as part of the annual insurance premiums


61

and subsequently retain the refundable payments made in excess

by the Representative Plaintiffs and Class Members.

B. RACKETEERING PREDICATE ACTS:

13.7 From 1998, to the present, for the purpose of

executing the ENTERPRISE’s Scheme to Defraud, the Defendants

caused the DTPW to place in the post offices or authorized

depositories for mail matter envelopes, containing the motor

vehicles licenses or registrations which were thereafter

delivered, by the United States Postal Service, to all motor

vehicles owners in Puerto Rico, in violation of the Mail Fraud

Statute, 18 U.S.C. § 1341. The motor vehicles licenses or

registrations contained the billing for the annual premium for

the compulsory insurance policy, which fraudulently included an

acquisition cost that was never going to be spent, plus an

administrative cost that was never going to be incurred by the

Defendants. Moreover, the motor vehicle licenses or

registrations fraudulently omitted the utterly relevant and

essential information that those parts of the dollar-premium

collected in excess were refundable.

13.8 Envelopes containing motor vehicles licenses or

registrations were delivered by the United States Postal Service

to:

a. Plaintiff Representative Noemi Torres Ronda, in the

years 1998 through 2011.


62

b. Plaintiff Representative Angelo Rivera Lamboy, in the

years 2005 through 2011.

13.9 The specific months and days when the envelopes,

addressed to the Plaintiffs and containing licenses or

registrations, were caused to be place in the post offices or

authorized depositories for mail matter, as well as the specific

dates on which similar envelopes were mailed to the Class

Members, can be readily ascertained from the records in the

possession or under the control of the DTPW.

13.10 Each of these mailings is a predicate act that is

indictable as mail fraud and together they constitute a pattern

of racketeering activity.

13.11 After receiving each annual license or registration

by mail, each Representative Plaintiff, like every other Class

Member, paid the premium for the compulsory liability insurance

to the Secretary of the Treasury.

13.12 After collecting the annual premiums from the

Representative Plaintiffs and Class Members, the Secretary of the

Treasury turned over the total proceeds to the JUA, including

the monies they paid as premiums in excess of the monetary

amount really spent or to be spend by the Defendants for

compulsory liability insurance coverage; and, thereafter, the

JUA distributed such proceeds among the traditional insurers and

itself.


63

13.13 The Defendants, knowingly, intentionally and

unlawfully, failed to reimburse to the Representative Plaintiffs

and Class Members the price they unknowingly paid for non-

incurred costs hidden in the annual insurance premium rate.

Instead, the Defendants embezzled such funds for their own

pecuniary benefit.

13.14 Through the conduct described herein above, in

furtherance of the Scheme to Defraud, the members of the

ENTERPRISE knowingly, intentionally and unlawfully, aided and

abetted and conspired with each other to violate, and did

violate Article 27.160 of the of Puerto Rico Insurance Code, 26

P.R. Laws Ann. § 2716(2)-(3) (illegal dealing in premiums).

13.15 Through the conduct described herein above, the

Defendants and the other members of the ENTERPRISE, which is

engaged in, and which activities affect interstate commerce,

knowingly, intentionally and unlawfully, aided and abetted,

conspired to, and each of them in fact did, conduct or

participate, directly or indirectly, in the conduct of the

ENTERPRISE’s affairs, through a pattern of Mail Fraud, in

violation of 18 U.S.C. § 1962(c).

C. THE INJURY BY REASON OF THE VIOLATION OF SECTION 1962(c)

13.16 As proximate cause of the Defendants’ violations to

Section 1962(c), the Plaintiffs and Class Members were injured

in their property inasmuch as each has been object of fraud in


-64-

the collection of a premium in excess of the monetary amount

really spent or in the process of being spent by the Defendants

for the compulsory liability insurance policy, without having

received the refund or return required by law.

13.17 The injuries suffered by the Representative

Plaintiffs and Class Members since 1998, and up to 2010, is

reasonably estimated in the amount of $406,618,935.00.

13.18 Pursuant to 18 U.S.C. § 1964(c), the Plaintiffs and

the Class Member they represent, shall recover threefold the

damages they have sustained.

13.19 Pursuant to 18 U.S.C. § 1964(c), the Plaintiffs are

entitled to reasonable attorneys’ fees.

THEREFORE, the Plaintiffs demand that Judgment be entered

in their favor and the Class Members they represent, and against

the Defendants: ordering the Defendants, to reimburse to the

Plaintiff Representatives and Class Members threefold the monies

they have collected as premiums in excess of the monetary amount

really spent by the Defendants for compulsory liability

insurance coverage, which up to the year 2010 yield the amount

of ONE BILLION TWO HUNDRED NINETEEN MILLION EIGHT HUNDRED FIFTY

TWO THOUSAND EIGHT HUNDRED AND FIVE DOLLARS ($1,219,852,805.00);

granting them pre-judgment and post-judgment interests; awarding

them a reasonable amount for attorneys’ fees, plus the costs of


-65-

this action; and, granting such other further relief that under

the circumstances may seem appropriate to this Honorable Court.

COUNT II – VIOLATIONS TO SECTION 1962(a) OF RICO

A. THE ENTERPRISE:



paragraph.

13.21 This cause of action arises under 18 U.S.C. § 1962(a)

and is asserted only against the JUA.


Section 1962(a), the JUA is the ENTERPRISE.

13.23 The JUA is "an entity capable of holding a legal or

beneficial interest in property", and a "person" within the

meaning of 18 U.S.C. § 1961(3).

13.24 The JUA conducts in Puerto Rico, either directly or

through its business transactions with the traditional insurer

Defendants, the business of selling motor vehicle compulsory

liability insurance policies.

B. THE RACKETEERING INCOME:

13.25 Through the conduct described herein before, the JUA,

as the ENTERPRISE, which is engaged in, and which activities

affect interstate commerce, knowingly, intentionally and

unlawfully, received income derived, directly or indirectly,


-66-

from the pattern of racketeering activity in which the JUA

participated as a principal within the meaning of Section 2,

Title 18, United States Code (18 U.S.C. § 2), committing

predicate acts of mail fraud; the JUA then used or invested,

directly or indirectly, part of such income, or the proceeds of

such income, in the operation of itself as an ENTERPRISE, i.e.,

the sale of motor vehicle compulsory liability insurance

policies fraudulently containing hidden charges for non-incurred

costs to derive racketeering income, in violation of 18 U.S.C. §

1962(a).

13.26 From 1998, to the present, for the purpose of

executing the ENTERPRISE’s Scheme to Defraud, the JUA

transmitted or caused to be transmitted, by means of wire,

funds, which included racketeering proceeds gained from the

Scheme to Defraud, in interstate commerce, to a financial

institution in Chicago, Illinois.

13.27 In December 2002, the OIC completed an “Examination

Report” of the JUA for the periods comprising from January 1,

1997, through June 30, 2001, wherein it was found that the

Northern Trust Company, in Chicago, Illinois, was handling 100%

of the JUA’s investments. The investment transactions between

the JUA and Northern Trust Company were all conducted by means

of electronic transfers such as “book entries” effectuated by a


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“registrar.” The evidence of such transfers was maintained

through electronic entries and devoid of physical documentary

receipts of the investments. The funds so transferred by

interstate wire included monies the Defendants embezzled or

misappropriated from the Plaintiffs and Class Members as result

of the Scheme to Defraud, in violation of the Wire Fraud

Statute, 18 U.S.C. § 1341.

13.28 Upon information and belief, at least up to 2009, the

Northern Trust Company continued to handle the JUA’s investments

and the investment transactions continued to be conducted by

means of electronic transfers.

13.29 The specific date when each wire transfer of funds

was made can be readily ascertained from the records in the

possession or under the control of the JUA and the Northern

Trust Company.

13.30 Each of these wire transfers is a predicate act that

is indictable as wire fraud and together they also constitute a

pattern of racketeering activity.

13.31 From 1998 to 2008, as shown in Table IV below, the

JUA reported $322,892,940.00 in net income derived from its

investments, as follows:


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TABLE IV

Total income Year Investment Income Investment Gain From Investments 1998 $6,767,898 $0 $6,767,898 1999 $9,306,809 -$552,474 $8,754,335 2000 $12,142,524 $710,511 $12,853,035 2001 $11,769,936 $4,426,037 $16,195,973 2002 $6,316,884 $1,769,451 $8,086,335 2003 $7,687,535 $2,689,996 $10,377,531 2004 $9,349,563 $1,907,637 $11,257,200 2005 $9,252,932 $8,564,727 2006 $9,836,631 $2,352,960 $9,836,631 2007 $11,881,736 -$20,320 $11,881,736 2008 $12,470,940 -$6,146,912 $64,152,640 Totals $106,783,388 $7,136,886 $113,920,274 = $322,892,940 13.32 Through the conduct described above, the JUA, as the

ENTERPRISE, which is engaged in, and which activities affect

interstate commerce, knowingly, intentionally and unlawfully,

received income from investments, which was derived, directly or

indirectly, from the pattern of racketeering activity in which

the JUA participated as a principal within the meaning of

Section 2, Title 18, United States Code (18 USCS § 2),

committing predicate acts of wire fraud; the JUA then used or

invested, directly or indirectly, part of such income, or the

proceeds of such income, in the operation of itself as an

ENTERPRISE, i.e., the sale of motor vehicle compulsory liability

insurance policies fraudulently containing hidden charges for

non-incurred costs to derive racketeering income, in violation

of 18 U.S.C. § 1962(a).


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C. THE INJURY BY REASON OF THE VIOLATION OF SECTION 1962(a):

13.33 As proximate cause of the JUA’s violations to Section

1962(a), the Plaintiffs and Class Members were injured in their

property inasmuch as each has been object of fraud in the



compulsory liability insurance policy, without having received

the refund or return required by law.

















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COUNT III – VIOLATIONS TO SECTION 1962(d) OF RICO

A. THE ENTERPRISE:



paragraph.

13.38 This cause of action arises under 18 U.S.C. § 1962(d)

and is asserted against all the Defendants.


Section 1962(d), the ENTERPRISE is the association in fact

defined in Section VIII, supra.

B. THE CONSPIRACY:

13.40 All the Defendants and others unknown, aiding and

abetting each other, acting in concert and/or combination, did

knowingly, intentionally, and unlawfully agree to commit the

multiple predicate acts of mail fraud (specifically described

herein before) forming the alleged pattern of racketeering

activity (also described herein before), as part of their


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unlawful Scheme to Defraud the, and to obtain money from, the

Representative Plaintiffs and Class Members who purchased or

acquired the motor vehicle compulsory liability insurance

policies fraudulently containing the hidden charges for non-

incurred costs, and thereby unlawfully defrauded the

Representative Plaintiffs and Class Members.

13.41 All the Defendants have violated Section 1962(d),

inasmuch as, in furtherance of their Scheme to Defraud and in

order to effects its objectives, they knowingly, intentionally,

and unlawfully, aiding and abetting each other, conspired to

conduct and participate in, and did conduct and participate in,

directly or indirectly, the affairs of the ENTERPRISE, through

the pattern of racketeering activity described herein before, in

violation to Section 1962(c).

C. THE INJURY BY REASON OF THE VIOLATION OF SECTION 1962(d):

13.42 As proximate cause of the JUA’s violations to Section

1962(d), the Plaintiffs and Class Members were injured in their

property inasmuch as each has been object of fraud in the



compulsory liability insurance policy, without having received

the refund or return required by law.


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COUNT IV – THE INSURANCE CODE VIOLATIONS



paragraph.

13.47 This cause of action arises under the Puerto Rico

Insurance Code and is asserted against all the Defendants.

13.48 Article 27.160 of the Insurance Code prohibits the

insurers to collect premiums for its policies that include items

or charges which are improper, speculative or do not adjust to

reality and the insurers are obliged to give back the excess of

the amount really spent or on the way to being spent for the

corresponding insurance.

13.49 The Defendants conspired to, and did, engage in

conduct designed to deceive the Representative Plaintiffs and

the Class Members and take their money and property under false

pretenses and through improper, inequitable and illegal means.

13.50 Not reimbursing the 8% of acquisition costs and the

4% of administrative costs for the uniform premiums of $99 and

$148, which were not incurred, constitutes a flagrant violation

to Article 27.160 of the Insurance Code, which forbids the

illegal dealing in premiums.

13.51 As a result of the mentioned conspiracy and illegal

conduct, the Defendants wrongfully obtained money belonging to


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the Representative Plaintiffs and the Class Members and were

thereby unjustly enriched at the latter’s expense.

13.52 The Defendants are jointly and severally responsible

and liable for disgorging all money that they wrongfully

obtained through their illegal conduct, and for restoring such

money to the Representative Plaintiffs and the Class Members,

plus pre-judgment and post-judgment interest.

13.53 The Defendants have denied responsibility for the

damages claimed herein. Due to said obstinate and temerarious

denial, and pursuant to the provisions of Rule 44 of the Rules

of Civil Procedure of the Commonwealth of Puerto Rico, the

Representative Plaintiffs and the Class Members are also

entitled to be awarded a reasonable amount for attorneys’ fees.




Plaintiff Representatives and Class Members the amounts of money




of FOUR HUNDRED MILLION SIX HUNDRED EIGHTEEN THOUSAND NINE

HUNDRED THIRTY FIVE DOLLARS ($406,618,935.00); granting them

pre-judgment and post-judgment interests; awarding them a


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reasonable amount for attorneys’ fees, plus the costs of this

action; and, granting such other further relief that under the

circumstances may seem appropriate to this Honorable Court.

COUNT V – DECEIT (“DOLO”) IN THE FULFILLMENT OF CONTRACTUAL OBLIGATIONS



paragraph.

13.55 This cause of action arises under the Puerto Rico

Civil Code and is asserted against all the Defendants.

13.56 The Defendants, knowingly and intentionally, through

deceitful means, avoided complying with their contractual

obligation of reimbursing the costs for the uniform premiums of

$99 and $148, which were not incurred, to the Representative

Plaintiffs and the Class Members.

13.57 The Defendants are jointly and severally responsible

and liable for disgorging all money that they wrongfully

obtained through their illegal conduct, and for restoring such

money to the Representative Plaintiffs and the Class Members,

plus pre-judgment and post-judgment interest.

13.58 The Defendants have denied responsibility for the

damages claimed herein. Due to said obstinate and temerarious

denial, and pursuant to the provisions of Rule 44 of the Rules

of Civil Procedure of the Commonwealth of Puerto Rico, the


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Representative Plaintiffs and the Class Members are also

entitled to be awarded a reasonable amount for attorneys’ fees.




Plaintiff Representatives and Class Members the amounts of money




of FOUR HUNDRED MILLION SIX HUNDRED EIGHTEEN THOUSAND NINE

HUNDRED THIRTY FIVE DOLLARS ($406,618,935.00); granting them

pre-judgment and post-judgment interests; awarding them a

reasonable amount for attorneys’ fees, plus the costs of this

action; and, granting such other further relief that under the

circumstances may seem appropriate to this Honorable Court.

XIV. PERMANENT INJUNCTION AND DECLARATORY JUDGMENT



paragraph.

14.2 A permanent injunction and a declaratory judgment will

serve the public interest in putting an end to the Defendants’

fraudulent conduct, where they, knowingly, intentionally and

willfully, fraudulently collected and continue to collect funds


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in their annual insurance premium as the purported acquisition

(i.e. brokerage fees) and administrative costs that are not

going to be incurred, without thereafter effectuating the

corresponding refund or return of such non-incurred costs to the

Representative Plaintiffs and the Class Members, in violation to

the dispositions of the Puerto Rico Insurance Code.

14.3 The issuance of a permanent injunction and a

declaratory judgment will also serve the public interest in

putting an end to the illegal retention by Defendants of the

portion of premium or charge for compulsory insurance in excess

of the amount really spent by the insurer, which resulted and

continues to result in a windfall to Defendants of millions of

dollars of illegal gains, in violation of RICO.

14.4 The Defendants’ unlawful conduct, if allowed to

prevail, will cause the Representative Plaintiffs and Class

Members permanent irreparable injury, as discussed, ante.

14.5 The injuries to the Representative Plaintiffs and

Class members far outweigh any harm which may be caused to

Defendants should the Court grant the injunctive relief.

14.6 A permanent injunction and a declaratory judgment will

serve the public interest in that the Representative Plaintiffs

and Class Members will not be subjected to the Defendants’

unlawful conduct and will not be deprived of their personal


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property.

XV. PRAYER FOR RELIEF

WHEREFORE, it is respectfully requested that Judgment be

entered by this Honorable Court in favor of the Plaintiffs and

jointly and severally against the Defendants:

A. Certifying the Classes defined in this complaint.

B. Granting the Plaintiffs and Class Members all the

monetary compensations and equitable relief

requested in the complaint.

C. Imposing upon the Defendants the payment of all

costs and expenses to be incurred in this

lawsuit.

D. Granting the Plaintiffs and Class Members

reasonable attorneys’ fees.

E. The issuance of a permanent injunction and

declaratory judgment barring the Defendants

continued conduct and practices.

F. Granting the Plaintiffs any other relief that

they may be entitled to as a matter of law.

RESPECTFULLY SUBMITTED. In San Juan, Puerto Rico, this 18th

day of August, 2011.


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ATTORNEYS FOR PLAINTIFFS: S/JOSE F. QUETGLAS JORDAN USDC-PR NO. 203411 Email: [email protected] S/PEDRO R. VAZQUEZ III USDC-PR NO. 216311 Email: prvazquezhotmail.com S/ERIC QUETGLAS-JORDAN USDC-PR No. 202514 [email protected] QUETGLAS LAW OFFICES PO Box 16606 San Juan PR, 00908-6606 Tel: (787) 722-0635/722-7745 Fax: (787) 725-3970


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